Tag: Life insurance

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Social Security FAQ: What You Need to Know

1- When Am I Eligible To Receive Benefits?

Depending on what year you were born, retirement benefits may begin as early as age 62 for partial benefits and as late as age 67.

If you were born before 1938, your age for full eligibility is 65.

If you were born after 1960, your age for full eligibility is 67.

People born between 1938 and 1942 reach full eligibility age on graduating scale two months per year.

People born between 1943 and 1954 become eligible for full benefits at age 66.

Those born between 1955 and 1960 become eligible based on a graduating scale increasing two months per year, finishing with an eligibility age of 67 for those born in 1960 or later.

2- How Is My Eligibility Determined?

Social Security eligibility is based on “credits” that you earn from working. You usually need to have earned 40 credits in order to qualify. As of 2011 you earn one credit for every $1,120 in earned income per year, up to a maximum of four credits.

3- How Much Will My Monthly Benefit Be?

Your Social Security benefit is calculated by averaging the earnings from your 35 highest income years. The average monthly payment is $1,082. As of January 2012, the average monthly benefit was increased by 3.6%, which works out to an additional $467 per year or an average benefit payment of $1,549 per month. It depends on your unique situation. You can calculate your Social Security benefit at www.ssa.gov.

4- Must I Quit Working to Receive Social Security?

You can continue to work without negatively impacting your Social Security benefits once you reach your full retirement age. Prior to full retirement age you are permitted to earn up to $14,160. $1 is withheld from your benefits for every $2 in earnings over the limit. You may earn up to $37,680 in the year you reach your full retirement age, then $1 is withheld for every $3 in earnings over the limit until the month you reach your full retirement age.

5- How Does Social Security Work For Married Couples?

If you both have worked long enough to qualify for Social Security, you both qualify for full benefits. If your spouse’s earnings record qualifies them for a benefit from Social Security that is less than half of your benefit, their benefit will be increased to a rate equal to half of your amount.

6- What If My Spouse Dies?

Provided the surviving spouse has reached their full retirement age, they are entitled to 100% of the deceased’s basic benefit amount. Prorated survivor benefits are paid to surviving spouses who have not yet reached full retirement age. The survivor will receive the higher benefit amount if the surviving spouse was receiving Social Security benefits and the deceased’s benefits were greater.

7- Is Social Security In Trouble?

Social Security is a “pay-as-you-go” system, so money paid in by current taxpaying workers is spent to pay benefits to current retirees. As the ratio of current workers to current retirees drops, fewer people will be paying into the system while more will be receiving benefits. People are also living much longer than when Social Security began in the 1930s, stretching out the payments which millions of Americans will be receiving. While some fear the end of Social Security, it is generally agreed that the U.S. government will not allow the Social Security program fail. That, however, does not mean that the program will be able to continue in its current state. Legislators have increased the eligibility age for receipt of

full benefits from 65 to 67 for people born in 1960 or later. Reductions in benefits, additional increases in the age of eligibility, or both, will likely to be needed in order to get the program back on solid ground. Another possible, although unpopular, course of action is raising taxes to fund the system.

When Should You Apply for Social Security Benefits?

When to apply for Social Security benefits is one of the most important issues you will face during your retirement. Most people simply apply for Social Security whenever they decide to retire, instead of taking into consideration what age will give them the maximum lifetime benefit. But can they afford to wait? It depends. Navigating Social Security can be a complicated process so it’s critical to take the time to evaluate your specific situation with a financial professional whom you trust.

Should I Take My Social Security Benefits Now or Delay?

Every individual’s situation is different. The best timing depends on your financial situation, including a thorough evaluation of critical income needs versus luxury income needs. You may be able to delay taking benefits, or need them sooner, depending on whether you or your spouse is working. Understanding how spousal benefits work, and using strategies to maximize your benefits can save you thousands of dollars over a long period of time. At age 66 you will receive full retirement age (FRA) benefits, but you are eligible to receive 75% of your full benefits if you apply at 62. Also, if you delay the onset of benefits past age 66 you can delay until age 70 and actually earn 132% of your FRA benefits. The longer the primary earner delays, the more the monthly income will increase. Theoretically, if you begin receiving Social Security early, you will receive a smaller monthly benefit for a longer time, and if you delay, you will receive a larger monthly benefit for a shorter time. There are “break-even calculators” which can be use to figure out how long you would have to live to make delaying worthwhile. Consult your financial professional to assist in this process. Calculating spousal benefits can be more complicated. Married couples have to consider how the retired worker benefit, spousal benefit, and survivor benefit will affect benefits and life time maximums. More information is available.

What You Don’t Know Could Cost You Thousands in Lost Benefits…

After having paid taxes on your hard-earned income over dozens of years, did you know that you may face even more taxes on your Social Security benefits?

Prepare yourself: up to 85% of your Social Security benefits could be taxable.1 However, with proper retirement planning, you can reduce or eliminate your Social Security tax liability, saving you a significant amount of money in your retirement.

How to Avoid the Social Security Tax Trap

Avoiding taxation of your benefits can only be accomplished in a couple ways.

First, you can reduce your overall taxable income

Second, you can use tax-deferred savings options, such as annuities.

Discuss with your financial professional. When properly structured, tax deferred annuities can increase your income while reducing taxes on your Social Security benefits. Income distributions are subject to regular income tax, and any income taken before age 59 ½ are subject to a 10% federal tax penalty.

Recently, we have all witnessed a dramatic change in the attitudes people have about their money. Investors have begun seeking ways to properly eliminate risk and preserve long-term, guaranteed growth. When people seek safety and protection, they often consider utilizing the services and guarantees of America’s insurance industry. For many years, people have considered annuities to be a safe haven for their life savings. The following is a brief outline that reveals some of the reasons annuities and insurance companies are so safe.

Regulation

The US insurance industry is truly one of the tightest regulatory environments in the world.
Each state has a Department of Insurance (DOI) regulating insurance activity in their respective state. For example, if you live in Oklahoma, your DOI is keeping an eye on the operation and solvency of each insurance company that does business in Oklahoma. It is important to keep in mind that the same holds true if that same insurance company is approved to do business in another state. In other words, your DOI is not the only one watching over the insurer. Every state the insurer does business in has another DOI looking over their shoulder as well. This creates a truly remarkable level of oversight to catch potential problems well before they can get out of hand. The following is a short list of the key areas under
constant supervision.

Capital & Surplus Requirements

Insurers use capital and surplus as a buffer to finance growth and pay for emergencies and other business commitments. Each state specifies a minimum dollar amount for required capital and surplus that each insurer must maintain.

Risk Based Capital Ratio (RBC)

This sophisticated formula allows regulators to evaluate whether the insurer maintains sufficient capital in relation to the relative risk within the insurers operations. Each year, the RBC levels for each company are reported to the National Association of Insurance Commissioners (NAIC) and the state where the insurance company is domiciled. These ratios are then compared to the standards set by the NAIC for monitoring. The NAIC prescribes action based on 6 categories within the levels of performance for the RBC Ratio.

Solvency

Annual Statements are filed with every state where the insurance company is licensed to do business and a copy sent to the NAIC. This allows for a thorough annual review of overall solvency within the company.

Other Ratios and Formulas

The Insurance Regulatory Information System (IRIS) is a system that has been developed to monitor financial conditions and prevent insolvency within an insurer. There are a total of 12 financial tests performed within the IRIS. The Financial Analysis and Solvency Tracking (FAST) system was created for additional analysis of larger insurers. The FAST system is applied to review the insurance company’s financial status every three years. The FAST system reviews both current financial records along with a review of the company’s 5-year history.

Guaranty Associations

As an additional safety net, each state has established a life and health guaranty association, which operates under the supervision of the state insurance commissioner. Insurers are required to participate in a state’s guaranty association in order to do business in the state. The association is responsible for funding obligations to policyholders should an insurance company be unable to meet the financial obligation. The members of the association are assessed fees to pay for obligations to customers. Guaranty funds have specific limitations on the amount they cover. These amounts vary from state to state. State laws ordinarily prohibit an insurer from using the existence of the guaranty association for the purpose of the sale of insurance and annuities.

Other Insurance Companies

In order to keep a safe distance from financial challenges, insurance companies work together to create an additional level of safety for policyholders. Many insurers actively pursue reinsurance through other insurance carriers. This further spreads the risk against the potential for a catastrophic financial dilemma to have a substantial impact on any individual company.

Specialization

Today, many insurance companies specialize in a particular line of business. While this may skew their risk into specific types of areas, it can also provide another level of security. For instance, an insurer that focuses almost exclusively in the annuity business is not exposed by large natural disasters or unforeseen health circumstances. A well-managed annuity company can provide tremendous levels of safety and confidence by properly managing the funds in their care through a conservative portfolio of government issued and investment grade bonds.

Time

Insurance companies are built to last. In Europe for example, you can find insurers that are literally hundreds of years old. This tradition of conservative asset management and well tested formulas for performance put insurance companies in a class by themselves.

Size

Insurance companies today are measured in terms of the billions of dollars that they have under their care. This financial clout allows companies to weather the storms of time and keep the promises they have made to their policyholders.

Ratings Services

Insurance companies are among the most closely monitored business entities in the United States. Most active insurers are scrutinized by ratings services such as Weiss, Standard & Poors, Fitch, and the premier insurance rating company, A.M. Best. Companies like A.M. Best do more than simply make sure the company is meeting the minimum standards for regulatory clearance. Most ratings services are measuring the amount that the insurance company actually EXCEEDS the minimum requirements.
This additional monitoring level cannot be overstated. Nobody thinks twice when a consumer asks, “What is that insurance company rated?” In fact, most agents don’t wait for the question to be asked. They often offer the current company ratings to the client because it is assumed that they expect to receive this type of information. Why? Because the insurance industry is safe and measurable to a high degree. Now think carefully; when was the last time you asked, “What is my bank rated?” or how about, “I wonder what the credit rating of my local stock broker is?”

Taxation

The items discussed above are indicative of a truly safe environment for an individual’s long-term money. However, there is a risk that is often overlooked; the erosive nature of the personal income tax. Every American that earns interest in non-qualified CDs, checking accounts, money market accounts, bonds and other interest bearing vehicles must pay Uncle Sam a percentage of what was earned whether they used this money or not. Insurance products like annuities allow people to determine when, if ever in their lifetime, they are going to pay income taxes on their earned interest. This advantage can dramatically increase the amount of money people have available when they need it most.

Summary

Are insurance companies really safe? Absolutely! Insurance companies that follow the prescribed formulas, practices and traditions mentioned above can achieve a level of financial security for customers that other financial service entities can only dream of. Give us a call to evaluate if your current portfolio passes the safety test!

NOW is the time for you to contact your Member of Congress and request they co-sponsor and vote in favor of the “Protecting American Families’ Retirement Advice” Act. This act will delay the implementation of the Department of LaborFiduciary Rule.

Last month, during our visit to Washington D.C., our team requested Congress help us delay the implementation of the Department of Labor (DOL) Rule. Congress has listened, and a new bill is circulating. When passed, the bill will delay the DOLFiduciary Rule for 24 months.

This is an important step in developing a workable solution regarding how, when, and where Americans receive investment advice on their retirement accounts. It also allows us to continue working through other avenues to develop a winning approach for independent agents to continue thriving as they provide safe solutions to many retirement challenges. Below are the resources you will need to contact your Member of Congress.

I am requesting your support to co-sponsor and vote in favor of the “Protecting American Families’ Retirement Advice” Act. This act will delay the implementation of the Department of Labor’s controversial fiduciary rule and will allow our industry adequate time to comply and adapt to this far-reaching rule which affects trillions of dollars in retirement accounts and tens of thousands of jobs in the fixed insurance industry. I am in favor of giving best interest advice, but the rule was poorly written and actually eliminates entire distribution channels which have served consumers with safe retirement options for many decades. Please join me. I respectfully ask you to co-sponsor and vote for this bill so we can continue to work with Congress to develop a workable solution and better protect consumers with a law from our elected Representatives rather than an administrative order. You can view the bill at the following URL. Thank you for your time.

The choice is clear . . . for peace of mind and tax-deferred growth.

Choices

CHOICEFOUR from EquiTrust Life Insurance Company® is a tax-deferred annuity featuring competitive

one-year renewable interest rates, access to your money and protection of your principal. It is built on the understanding that competitive returns and minimal taxation are critical to reaching your retirement goals. You choose the time horizon that best fits your liquidity needs and a strategy that suits your interest rate outlook.

CHOICEFOUR is a single premium deferred annuity with a twist – you can make additional premium payments anytime during the first contract year. Plus, you have a variety of choices to customize your contract to suit your objectives.

CHOICEFOUR is really four products in one. You choose the product for you:

1. BASE CONTRACT

The “Base Contract” features a one-year fixed rate that is reset annually. All premiums paid in the first contract year will receive the same interest rate as the initial premium. The interest rate in subsequent years may change on each contract anniversary – subject to the Minimum Guaranteed1 Interest Rate.

Upon partial withdrawal or surrender2, you are subject to a surrender charge on the accumulation value, in effect for nine years and declining annually: 12, 11, 10, 9, 8, 7, 6, 4 and 2 percent.3

If you need access to money from your contract, you may withdraw interest earned in the prior 12 months, and do so without surrender charges.

2. MARKET VALUE ADJUSTMENT OPTION

If you’re confident that you will not need access to your money early, you may choose the Market Value Adjustment (MVA) Option. This option gives you an immediate 1.50 percent premium bonus, applied to all premiums received in the first contract year.

The Market Value Adjustment Option affects early surrenders of the contract in excess of the free withdrawal provision. The MVA may increase or decrease the accumulation value surrendered when interest rates move up or down relative to rates at the time of your annuity purchase. At the end of the surrender charge period, your cash surrender value will equal the full accumulation value. Ask your agent for more details on the MVA, or refer to your contract.

3. LIQUIDITY OPTION

If you have a financial time horizon shorter than nine years, you may choose the shortened surrender charge schedule available with the Liquidity Option. This will reduce your surrender charge schedule to six years, declining annually: 12, 11, 10, 9, 8 and 7 percent.3 The cost of the Liquidity Option is reflected in an interest rate slightly lower than the rate available with the Base Contract.

In addition, the Liquidity Option allows you greater access to your money. You may withdraw up to 10 percent of the accumulation value annually without surrender charge, beginning in the second contract year. Although withdrawals of greater than 10 percent can be made, a surrender charge will be applied to amounts exceeding the 10 percent maximum.

Keep in mind that any withdrawals may be subject to federal income tax, and you may incur a 10 percent IRS penalty tax on withdrawals taken prior to age 591/2.

4. COMBINATION OF BOTH OPTIONS

This option combines the benefits of both. If you prefer a shorter surrender charge schedule, yearly access to 10 percent of your accumulation value without surrender charge or MVA, as well as a 1.50 percent premium bonus in exchange for the Market Value Adjustment and a slightly lower interest rate, then both Options may be right for you.

Getting Started

CHOICEFOUR is available for issue ages 0-85. You pay no initial front-end sales charges or annual maintenance fees; 100 percent of your premium goes to work for you right away.

Other Features

ANNUITIZATION OPTIONS

Several annuitization payment options are available, including payment for life, payment of a designated amount or payment for a certain period of time. You determine the schedule that best fits your financial circumstances – a period as short as 5 years, or for as long as the annuitant is alive. Your agent can help you determine the most appropriate payment option, or discuss a specific payment schedule you may have in mind.

THE VALUE OF TAX DEFERRAL

Currently, all interest income earned on an annuity accumulates on a tax-deferred basis. No income taxes are payable until you receive a payment from your contract. If you are under age 59 1/2 at the time of withdrawal, an additional 10 percent IRS penalty may be imposed. Tax deferral is currently available only to individuals and joint owners, not to corporations or other non-individuals.4

MINIMUM GUARANTEE

You are guaranteed, upon surrender, to receive no less than 100 percent of your premiums, excluding any premium bonus if applicable, less any partial withdrawals, plus interest earned at a rate of no lower than 1% and no higher than 3%, less surrender charges.

NURSING HOME WAIVER RIDER

For additional peace of mind, your contract includes a Nursing Home Waiver Rider5 at no extra cost.

Available at issue up to age 80. If you are confined to a nursing home or hospital for 90 days or more, your contract accumulation value will be available without surrender charges or MVA beginning in the second contract year and during your confinement.

BENEFITS UPON DEATH OF OWNER

If the owner of the annuity dies, the full accumula- tion value is paid to the beneficiary, without surren- der charges or MVA. Upon death of an owner, the beneficiary may choose to have the death benefit paid immediately or applied to a payment option.

FREE-LOOK PERIOD

After your CHOICEFOUR contract is issued, you have a specified number of days to review it; see your contract for complete details. If you are not com- pletely satisfied with the terms, you may return the contract and receive 100 percent of your premiums paid, less any prior withdrawals.

Ask Your Agent

Ask about the variety of options that CHOICEFOUR offers for the stages of your life, or refer to your contract.

This is a summary only. CHOICEFOUR may not be available in all states. In those states where it is available, certain provisions may vary or may not be available. Prior to purchasing this contract, contact your agent or the company for complete contract provisions and details.

How do these riders work?

The Accelerated Benefit Riders (ABRs) are offered for no additional premium. However, the accelerated benefit payment will be less than the amount of death benefit requested because it is reduced by an amount calculated based on evaluation of the insured’s future expected mortality at the time the benefit is exercised as well as an administrative fee of up to $500 assessed when the benefits are elected. See acceleration amount limitations below.

Three separate riders may provide for the payment of an accelerated benefit which cover the following conditions:

Accelerated Benefit Rider for Terminal Illness (Policy Form Series: ABR14-TM): For use if an eligible insured has an illness or chronic condition that is expected to result in death within 12 to 24 months, depending on state

Accelerated Benefit Rider for Chronic Illness (Policy Form Series: ABR14-CH): For use if an eligible insured is unable to perform two out of six activities of daily living (bathing, continence, dressing, eating, toileting, or transferring) or is cognitively

Accelerated Benefit Rider for Critical Illness (Policy Form Series: ABR14-CT): For use if an eligible insured experiences a critical illness described in the rider after the issue date. Covered critical illnesses may be found in the Rider

California Residents:

A supplemental application is required to determine

The chronic and critical illness versions are not available for applicants age 65 and

Chronic illness is not available in conjunction with term coverage whether it is the base policy or a

The accelerated death benefit is an unrestricted cash

Minimum Policy Death Benefit to Obtain Riders:

Terminal Illness: $25,000

Chronic & Critical Illness: $50,000

Maximum Death Benefit Eligible for Acceleration

$2,000,000 (issue ages 0 through 65)

$1,000,000 (issue ages 66 or older)

Policies exceeding the maximum acceleration amount will still contain the Accelerated Benefit Riders; however, the owner will only be able to accelerate up to the maximum death benefit eligible for acceleration. For example, on a $4,000,000 policy (where eligible), the owner will only be able to accelerate $2,000,000 if issue age 65 or under at time of issue.

There is no minimum partial acceleration request; however, the partial acceleration will not be allowed if the policy’s face amount would be reduced below the minimum required for the product.

The accelerated benefit may be paid in a lump sum or applied to any settlement option under the contract that does not involve life contingent payments.

Not everyone that applies for acceleration will be eligible to receive accelerated benefits.

Eligible Accelerations:

If the primary Insured suffers a qualifying medical condition, the base policy and any additional riders on the primary Insured are eligible for acceleration. Likewise, if a spouse or other Insured party suffers a qualifying condition, their specific rider benefits will also be eligible for acceleration. The Children’s Term Rider is not eligible for acceleration.

Upon payment of the accelerated benefit to the owner, the policy or rider(s) providing the eligible death benefit will be treated as if the Insured has died if full acceleration is elected. In the event of a partial accelerated benefit, the policy or rider will be treated as if there has been a decrease to the face amount.

This Rider is automatically included in specified life insurance products in New York. There is no additional premium for the Accelerated Benefit Rider but an administrative fee not to exceed $300 will be deducted from the initial Accelerated Benefit.

In the unfortunate event, you are diagnosed with an illness that is expected to result in death within 12 months, you will be eligible to accelerate a portion of your death benefit in advance.

The maximum Initial Accelerated Benefit you may request is the lesser of 50% of the Eligible Death Benefit or $250,000. However, should you wish to initiate subsequent accelerations, the maximum eligibility of acceleration is limited to 80% of the Eligible Death Benefit or $400,000.

Upon death, any funds paid under the Accelerated Benefit Rider will be held as a lien against the death benefit in addition to any outstanding loan balances and interest charged to the policy.

How does this benefit work?

This Rider is automatically included on qualifying Signature Guaranteed Universal Life Insurance Policies. On each available option period, the rider allows you to surrender your policy in full and receive a return of your premiums paid subject to policy details.

The rider requires payment of the policy’s annual minimum premium to remain in-force. In any given year, if the policy’s annual premium payment is not satisfied you will be notified and have 60 days to make the payment. If the required payment is not paid, the rider will terminate and will not be eligible for reinstatement.

Rider Restrictions

The Cash-Out Benefit will be reduced by any loans or withdrawals.

Rider Details

You may only choose to Cash-Out during the 60 day period following each available option The Cash-Out Benefit will be reduced by any loans, withdrawals, or decreases.

Cannot be added after

The amount of the Cash-Out Benefit will depend on the option period the rider is exercised and the death benefit of the

At each option period, the Guaranteed Cash-Out Value will be the LESSER OF: